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Hospital Stocks Trading at All Time Highs

Hospital Stocks
Sector Update
18/08/2021

There is a surge of investor interest in healthcare, read hospital, stocks. The table below captures 3 major healthcare stocks in India along with YTD returns and returns from 52-week lows.

All the 3 stocks are quoting at their all-time high levels.

 

Company

CMP (17-Aug-21)

CMP (31-Dec-20)

YTD Returns

Returns from Lows

Apollo Hospitals

Rs.4,921

Rs.2,413

103.94%

210.47%

Max Health

Rs.344

Rs.140

145.71%

254.64%

Fortis Healthcare

Rs.265

Rs.155

70.97%

115.45%

 

What has triggered these healthcare stocks to scale lifetime highs. Many of these stocks were languishing for a long time and the fortunes appear to have changed for the better only in the last year. Let us look at the story in each of these stocks.


1.    In the Jun-21 quarter, Apollo reported 37% growth in sequential profits. The hospital segment saw revenues grow sharply by 26% on the back of bed occupancy increasing from 38% to 67% in the last 1 year, leading to better absorption of costs. The average revenue per occupied bed grew 8% YoY, giving a boost to the stock.

2.    Max Health operating EBITDA was up by 37% at Rs.360 crore in the June quarter. EBITDA margins improved by 309 bps on a YoY basis to 27.2% in the Jun-21 quarter. Like Apollo, Max also gained from higher bed occupancy as well as from control over direct costs.

3.    Fortis turned around from a loss of Rs.187 crore to a profit of Rs.430 crore in the Jun-21 quarter. Even if you exclude the exceptional gain from the sale of SRL, hospital revenues more than doubled while EBITDA margins improved to 15%.

In short, the common thread has been better bed occupancy and better cost management. Above all, the CAPEX is over for most healthcare companies and it is now time to reap the gains.
 

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